Uber and Lyft face worker misclassification lawsuit from CA Attorney General and city attorneys

A dashboard-mounted smartphone displays the Uber Technologies Inc. app as an Uber X driver drives in the 'Mainhattan' financial district in Frankfurt, Germany, on Friday, April 12, 2019. Uber's long-awaited roadshow for what is expected to be 2019's biggest U.S. IPO is expected to kick off on April 26. Photographer: Alex Kraus/Bloomberg via Getty Images

California Attorney General Xavier Becerra, along with city attorneys from Los Angeles, San Diego and San Francisco, filed a lawsuit asserting Uber and Lyft gain an unfair and unlawful competitive advantage by misclassifying workers as independent contractors.

The suit argues Uber and Lyft are depriving workers of the right to minimum wage, overtime, access to paid sick leave, disability insurance and unemployment insurance. The lawsuit, filed in the Superior Court of San Francisco, seeks $2,500 in penalties for each violation, possibly per driver, under the California Unfair Competition Law, and another $2,500 for violations against senior citizens or people with disabilities.

"The companies, we believe and argue, are shirking their obligation to their workforce," Becerra said in a call today. By shirking those obligations, Becerra said, Uber and Lyft are shifting those costs to California taxpayers.

"American taxpayers end up having to help carry the load that Uber and Lyft don't want to accept," Becerra said. "These companies will take the workers' labor, but they won't accept the worker protections."

In a statement to TechCrunch, Lyft says it's looking forward to working with the California AG "and mayors across the state to bring all the benefits of California’s innovation economy to as many workers as possible, especially during this time when the creation of good jobs with access to affordable healthcare and other benefits is more important than ever."

Uber, on the other hand, says it will contest this in court.

"At a time when California’s economy is in crisis with four million people out of work, we need to make it easier, not harder, for people to quickly start earning," an Uber spokesperson told TechCrunch. "We will contest this action in court, while at the same time pushing to raise the standard of independent work for drivers in California, including with guaranteed minimum earnings and new benefits."

Those who work as 1099 contractors can set their own schedules, and decide when, where and how much they want to work. For employers, bringing on 1099 contractors means they can avoid paying payroll taxes, overtime pay, benefits and workers’ compensation.

According to the ABC test, in order for a hiring entity to legally classify a worker as an independent contractor, it must prove the worker is free from the control and direction of the hiring entity, performs work outside the scope of the entity’s business and is regularly engaged in an “independently established trade, occupation, or business of the same nature as the work performed.”

The ballot initiative Uber and Lyft are proposing looks to implement an earnings guarantee of at least 120% of minimum wage while on the job, 30 cents per mile for expenses, a healthcare stipend, occupational accident insurance for on-the-job injuries, protection against discrimination and sexual harassment and automobile accident and liability insurance.

"They're not going to succeed in any of that because voters are too smart for that," Los Angeles City Attorney Mike Feuer said on the press call today.

Labor issues have been front and center amid the COVID-19 pandemic. Just yesterday, Amazon Web Services VP Tim Bray resigned from the company, citing Amazon's firings of employees that were critical of the company. Meanwhile, gig workers have organized a number of strikes and protests to demand basic workplace protections like masks and gloves while they're on the job. And Uber and Lyft drivers have long been advocating for themselves. Last year, as both Uber and Lyft were gearing up to make their debuts on the public market, drivers staged a number of protests to demand better pay, benefits and the right to form a union.

"This is a big win for drivers," driver and organizer with Gig Workers Rising Carlos Ramos said in a statement. "Billionaires like to pick and choose what laws they follow. Today, California is showing that no one is above the law, not even big tech. This is a win for workers and for organizing."

This isn't the first lawsuit Uber and Lyft have faced regarding the misclassification of drivers, but it's surely the most collaborative one. Since AB 5 went into effect in January, organizations like Gig Workers Rising have been calling for legislators to enforce the law.

"This is unprecedented speed for a case like this to be brought," SF City Attorney Dennis Herrera said. "This is unprecedented speed and coordination and I think the fact that you have this pandemic just highlights the danger of the work these essential workers are doing out on the street every day. But this lawsuit would've been brought regardless in order to protect the interest of workers and California taxpayers."